World’s largest asset manager Blackrock joins war on climate change

The world’s largest asset manager has sought to position itself as a climate change champion after announcing a raft of changes to its investment strategy.

Blackrock, which manages more than £5 trillion on behalf of savers and pensioners, said it would stop actively investing in major coal producers and increase the money it ploughs in to sustainable companies from £68billion to £760billion.

Blackrock’s veteran chief executive Larry Fink revealed the measures in his annual letter to company bosses, telling them that climate change would cause a ‘significant reallocation of capital’.

Referring to the Extinction Rebellion protests, he added: ‘Last September, when millions of people took to the streets to demand action on climate change, many of them emphasised the significant and lasting impact it will have on economic growth and prosperity – a risk that markets have been slower to reflect.

‘But awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance.’

The shift at Blackrock comes on top of several warnings from Mark Carney, the outgoing governor of the Bank of England. 

Carney, who has been one of the most vocal central bankers on environmental issues, told companies last month that many of their assets would become worthless unless they woke up to the ‘climate crisis’.

Fink pointed out that cities may not be able to afford their infrastructure needs if weather conditions changed, and lenders may not be willing to hand out mortgages if they cannot estimate risks to houses over the long term.

Inflation could also soar, having a knock-on effect on interest rates, if the cost of food climbs from drought and flooding.

Other measures Blackrock is taking to tackle these problems include:

• Becoming ‘increasingly disposed’ to vote against company boards which aren’t doing enough to tackle climate change;
• Putting environmental risks on the same footing as more traditional risks when assessing investments;
• Giving its clients data on the sustainability and carbon footprint of each fund;
• Doubling its number of exchange-traded funds (ETFs) which focus on companies with a strong environmental, social and governance score.

Fink said: ‘Over the 40 years of my career in finance, I have witnessed a number of financial crises and challenges. 

‘Even when these episodes lasted for many years, they were all, in the broad scheme of things, short-term in nature.

‘Climate change is different. Even if only a fraction of the projected impacts is realised, this is a much more structural, long-term crisis.

‘Companies, investors, and governments must prepare for a significant reallocation of capital.’

Influential wealth manager Ross Gerber, co-founder of Gerber Kawasaki, said: ‘Larry Fink is a visionary leader and we’re proud of the stance Blackrock is taking on climate change – we have substantial assets with them. This is one reason why.’

But others were more critical of the difference which Blackrock’s measures would actually make to the climate.

It still has billions of pounds of investors’ money sitting in passive funds, which simply track an index and do not differentiate between environmentally ‘good’ and ‘bad’ companies.

For campaigners at Extinction Rebellion, Blackrock’s measures did not go far enough. 

A spokesman said: ‘It’s not always the case that something is better than nothing, particularly if it’s used to distract from the truth. And the truth is that the world’s biggest miners and polluters will not be losing any sleep over this.

‘Blackrock remains waist-deep in fossil fuel investments and the world’s top backer of companies that destroy the Amazon rainforest and ignore the rights of indigenous people.’